October futures fell as much as 1.7 per cent in NY after declining for the first time in eight days on Monday.

U.S. West Texas Intermediate (WTI) crude was down 80 cents, or 1.7 percent, at $47.30 a barrel.

Though Iran has not yet decided whether to join a new effort, Tehran appears to be more willing to reach an understanding with other oil producers, the sources said.

Iran refused to cut its production the last time OPEC countries and Russian Federation met in Doha in April to discuss how to stabilize oil prices.

"Iran is reaching its pre-sanctions production level soon and after that it can cooperate with the others", said a source familiar with Iranian thinking after a visit by Venezuelan Oil Minister Eulogio Del Pino to Tehran as part of a tour to convince OPEC of a production freeze.

A report from Reuters on Tuesday suggested that OPEC member Iran may join a global contingency of producers in freezing crude output at next month's International Energy Forum in Algiers, Algeria.

Because of the ongoing production and storage overhang in crude and refined products markets, Barclays said that the 20-percent price rally since early August was unwarranted, and that oil prices of $50 or higher were now "unsustainable".

As for the all-important fundamentals that tend to be overlooked whenever an OPEC member claims it will support a freeze, Goldman points out that "supply continues to feature the cross currents of rising low-priced supply, declining high-cost production, and new project ramp up; in fact, marginally more bearish data recently than we had assumed suggests in our view that the recent price rally should stall".

Since meeting in November 2014 to discuss falling oil prices, OPEC 's strategy has been to refuse to trim production to keep prices low until high-cost producers such as the USA are pushed out of the market.

Analysts cast doubt on a recent oil price rally, saying that much of it was a result of short-covering and anticipation of upcoming producer talks in September to discuss means to curb ballooning oversupply. Del Pino was in Tehran on August 15 before flying to Jeddah in Saudi Arabia. Saudi Arabia was open to a production cap under the condition that Iran would agree to one as well.

Venezuela's cost was more than double of those, at $27 a barrel, while Nigeria's was the highest at $29.

Reuters also noted that Iran was a significant roadblock at the previous attempt at a production freeze pact.